The US equity markets closed marginally higher on the back of better-than-expected retail sales data while European markets finished mixed. Investment guru Marc Faber advised caution while trading in equities. He also said that growth and investment in emerging markets depends greatly on reforms measures by their respective governments.

“I would be very careful to argue that you can’t go wrong by being exposed to equities,” he told CNBC in an interview.

In 2009, Faber says, people couldn't see why stocks would go up. “Now suddenly they can’t see why they would go down. Stocks will always fluctuate and all asset prices will fluctuate. The mood is now essentially very optimistic and the prices are no longer very cheap,” he says.

According to Faber, consumption in emerging economies will continue to grow not just in China but elsewhere, as well as in countries like India, Indonesia, Philippines, etc. Continuous growth will depend very much on reforms and also on how to deflate the colossal credit bubble in China. This is going to be a huge problem because of huge underground credit and questionable loans and investments.